It sometimes happens that a company buys back its own shares. What does this involve and what are the consequences?
It involves the company purchasing its own shares in accordance with a specific procedure set out in the Companies Code. The relevant decision must be taken by the general meeting with a special four-fifths majority. This also automatically implies that there can be no conflict of interests, since the management body merely implements the decision taken by the general meeting.
The value of the repurchased shares may never exceed 20% of the issued capital. After the purchase decision has been taken, a non-distributable reserve is recorded in the amount for which the shares were purchased.
The company may then decide to cancel or dispose of its own shares either immediately or at a later date.
In the case of an NV it is also possible that a sale or cancellation of the shares will never take place, but that it will continue to hold the shares. However, this is not possible for a BVBA: the company must dispose of its own shares within two years.
If you are considering buying back your own shares as a BVBA, you should therefore be sure to sell the shares in time to prevent them from being declared invalid by operation of law.
